PhosAgro Reports 2013 IFRS Net Profit of RUR 8.6 bln
OREANDA-NEWS. PhosAgro (“PhosAgro” or “the Company”) (Moscow Exchange, LSE: PHOR), a leading global vertically integrated phosphate-based fertilizer producer, today announces its audited consolidated IFRS financial statements for 2013. PhosAgro earned a net profit for the year of RUB 8.6 billion (USD 269 million), compared to RUB 24.5 billion (USD 788 million) in 2012. Basic and diluted earnings per share came to RUB 60 (USD 1.88) for 2013 compared to RUB 166 (USD 5.34) in 2012.
Production, sales and logistics flexibility:
During 2013 PhosAgro's revenue and sales volumes benefited from the Company's strategy of enhancing production flexibility, with total fertilizer production and sales volumes showing significant year-on-year growth of 9% and 11%, respectively. Revenue for the same period decreased by 1% year-on-year as result of:
a 17% decline in average DAP prices (FOB Tampa) and an 18% decline in average urea prices (FOB Baltic);
a 4% year-on-year increase in revenue following the consolidation of Metachem in December 2012, which brought sales of technical phosphates (STTP) and potassium sulphate (SOP) amounting to RUB 4,551 million (USD 143 million) in 2013.
• In June 2013 PhosAgro signed a contract with an international consortium led by Mitsubishi Heavy Industries ltd for construction of a new, energy efficient ammonia plant with a capacity of 2,200 tonnes/day (760 ths tons/year) at PhosAgro-Cherepovets.
Consolidation of ownership in production facilities:
• During 2013, PhosAgro successfully consolidated 100% ownership in Apatit by way of a compulsory share purchase offer and a subsequent squeeze out, which was completed in September;
• In June 2013, PhosAgro acquired 25.24% of Metachem, bringing its ownership in the subsidiary to 100%;
• In August 2013, PhosAgro acquired 100% of PhosInt Trading Limited, which owns 100% PhosAgro Asia Pte Ltd. PhosAgro Asia is PhosAgro's first trading operation in Asia, and is focused on international sales of mineral fertilizers in the region.
PhosAgro reports its 2013 net profit of RUB 8.6 billion (USD 269 million), a decrease of 65% year-on-year from RUB 24.5 billion (USD 788 million) in 2012. Revenue for the period decreased by 1% year-on-year to RUB 104.6 billion (USD 3,283 million), compared to RUB 105.3 billion (USD 3,387 million) for 2012.
Operating profit for 2013 was RUB 16.1 billion (USD 507 million), a 43% decrease from RUB 28.4 billion (USD 913 million) in 2012. EBITDA margin decreased year-on-year to 23%, compared to 33% for 2012.
Cash flows from operating activities amounted to RUB 17.9 billion (USD 563 million) in 2013, compared to RUB 25.5 billion (USD 819 million) in 2012. The Company's capital expenditure (capex) in cash terms during 2013 was RUB 17.8 billion (USD 559 million), compared to RUB 13.4 billion (USD 430 million) in 2012.
Net debt at 31 December 2013 stood at RUB 43.8 billion (USD 1,339 million), up from RUB 26.8 billion (USD 883 million) at 31 December 2012. Net debt increased due to a significant cash outflow for the Apatit minority shareholder buyout, which was funded through PhosAgro's successful long-term USD 500 million debut Eurobond issue. Unfavourable market conditions also contributed to the growth in net debt. As a result, the Company's net debt to EBITDA ratio increased to 1.8 as of 31 December 2013. Excluding the effect of the Apatit buyout (under normal course of business), net debt/EBITDA stood at 1.4 as of 31 December 2013.
Commenting on the 2013 results, PhosAgro Management Board Chairman and CEO Andrey A. Guryev said:
“This has been a challenging year for the fertiliser industry. However, I am pleased that we have delivered a solid financial performance and have completed several strategic initiatives focused on developing sustainable, low cost production by maximising the value inherent in our high quality phosphate resource.
“In 2013 we managed to increase fertilizer production and sales by 9% and 11%, respectively. Our sales remained relatively stable when FOB Tampa DAP prices dropped 23% from USD 488 per tonne at the beginning of the year to USD 378 at year-end, and bottomed out at just USD 343 per tonne in the middle of November after declining following the breakup of BPC (the minimum price seen since the 2009 financial crisis). This brought most of our industry to below break-even levels in 4Q 2013. I am pleased, therefore, that we have managed to generate a 23% EBITDA margin in such challenging times, and to maintain almost 100% production capacity utilisation.
“Despite challenging market conditions, we have achieved several strategic goals with respect to consolidation of our production subsidiaries during the period: we completed the Apatit minority squeeze out and now own 100% of this unique mining asset. We also made progress on further organic growth with the launch of construction of a new modern ammonia plant. This plant will help to sustain our low cost advantage in the future, and establish a base for the development of further downstream fertiliser capacity aimed at delivering any type of phosphate-based fertilizer to farmers in either concentrated or complex triple (NPK) and even quadruple (NPKS) nutrient form.”
2013 Market Conditions
• In the first half of 2013, further subsidy cuts in India due to the continued economic downturn, accompanied by a cold spring in the US and Europe, prevented any seasonal price recovery;
• Weak demand from India, the world's largest DAP market, combined with continued declines in the rupee vs. the US dollar, put downward pressure on DAP/MAP prices;
• According to the IFA, India imported 3.7 mln tonnes of DAP in 2013, compared to 5.9 mln tonnes in 2012, a decline of 37%;
• Uralkali's new sales strategy, following its exit from BPC, had a negative impact on all three nutrients and caused stagnation on global fertilizer markets, which resulted in significant decreases in prices for all fertilizers: between 30 July 2013 and the end of the year, DAP prices (FOB Tampa) decreased from USD 455 to USD 375;
• The average DAP price per tonne for 2013 fell 17% to USD 442 (FOB Tampa), compared to USD 535 (FOB Tampa) in 2012;
• Weakness in the global phosphate-based fertilizer market has led producers to curtail production. According to Argus FMB and Fertecon in Q4 2013, OCP decreased its capacity utilisation to 50%-60%, while in Chinese capacity utilisation was at 50%-70% according to CFMW;
• China's total phosphate-based fertilizer exports for 2013 decreased by 6% (400 ths tonnes) year-on-year and amounted to 5.8 mln tonnes, compared to 6.2 mln tonnes in 2012;
• Despite the decline in feedstock prices, during 2013 DAP spot prices remained below cash cost levels for marginal producers of concentrated phosphate fertilizers, and in 4Q spot prices were below the average cash cost for the industry.
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